Walmart Gets More Out of Minimum Wage Laws Than You Think

Walmart CEO Doug McMillon is pushing Congress to raise the federal minimum wage. The move, which was celebrated by many minimum proponents of a wage hike, seems out of character, especially if you consider that the company’s base wage is $11 per hour — lower than its competitors.

But prior to the announcement, presidential hopeful Sen. Bernie Sanders accused the company of paying “starvation” wages, a move that may have helped to push McMillon to be more forceful on the matter.

It’s “time for Congress to put a thoughtful plan in place,” he added, “to avoid unintended consequences.” But what about the unintended consequences of raising the minimum wage?

While some argue that the hike would “put more money in the pockets of low-income consumers,” benefiting the company in the long run, the reality is that a higher minimum wage would actually harm the unskilled workers in the low-income bracket first, effectively putting less money in their pockets as a result.

The new law would also strengthen Walmart’s already strong market share, as raising the minimum wage would force its smaller competitors to cut on payroll considerably. With a shrinking competitor base, Walmart would have nothing to worry about, especially in small towns.

Minimum Wage Laws Boost Poverty

Proponents of a minimum wage increase are right to say that workers will see their wages go up if the law changes. What they don’t seem to realize, at least on the surface, is that wages are going up only for the workers who manage to keep their jobs. Nobody else will benefit.

Worse yet, the least skilled workers are the first to be priced out of the labor market. That means that the poorest will suffer, as they will have access to fewer job opportunities.

Additionally, the poor will also suffer when trying to pay for food and other necessities.

When wages go up, the cost of everything else goes up as well. If the cost of doing business increases, so will consumer prices. And in the end, consumers who lose their jobs because of minimum wage hikes will be hurt both because they were kicked out of the labor force and because consumer prices will go up.

Down the road, when supporters of the minimum wage increase notice that more people are in poverty precisely because of these laws, they will not try to undo the harm they’ve caused. Instead, they will lobby for more welfare programs, as more people will be in dire need of assistance. When that happens, elected officials will come for everybody’s wallet, as they will have to raise taxes to keep the increased flow of welfare payments going.

While McMillon might be quite happy to see the competition die out thanks to a minimum wage hike, he might soon learn that the policy also has very bad unintended consequences for business. After all, if consumers lose their jobs in droves, Walmart will lose their customer base as well.

Comment section

1 thought on “Walmart Gets More Out of Minimum Wage Laws Than You Think”

What would be better than raising the minimum wage by $X/week? A broad-based punitive “vacancy tax” on vacant land and unoccupied buildings, which property owners are so keen to avoid that it *reduces rents* by $X/week. Why would this be better? Because:
(1) When you allow for income tax and withdrawal of welfare, a dollar *saved* is worth much more than a dollar *earned*.
(2) By themselves, higher wages would be competed away in higher rents. Landlords might even try to raise rents by the *gross* increase in wages, not allowing for the Effective Marginal Tax Rate.
(3) Nobody says lower rents would price workers out of a job! Indeed, the scramble to avoid the vacancy tax would *create* jobs. And the lower rents would create more jobs, because jobs can’t exist unless (a) the employers can afford business accommodation, and (b) the employees can afford housing within reach of their jobs, on wages that the employers can pay. (Implication: The tax should apply to both commercial & residential property.)
(4) Why should employers pay for a problem caused by deadbeat landowners?
(5) The economic activity driven by a vacancy tax would broaden the bases of other taxes, allowing their rates to be reduced, so that the rest of us would pay LESS tax!